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Smart City

Smart cities are equipped with interconnected networks of sensors, devices, and software for data collection and city operations optimization.

Use cases for smart citiesOverview

A smart city is defined as a city equipped with an interconnected network of sensors, devices, and software that is capable of collecting and analyzing mass amounts of data from various industries including, but not limited to: urban planning, garbage collection, retail, and more. The intent of smart cities is to create more sustainable environments for residing citizens.

Various technologies are responsible for the efficacy of smart cities, including:

  • Information and communications technology (ICT)
  • Interconnected devices running on internet-of-things (IoT) networks.
  • Geographic information systems (GIS)

Each component of a smart city works with the other systems to contextualize mass amounts of data that can be leveraged to improve the overall functionality of a city’s components and systems.

Technology powering smart cities
ICT frameworks

The ICT framework is made up of six components that work in conjunction with the IoT network. The components are made up of:

  • Data: raw facts and figures.
  • Hardware: physical components, like devices and sensors.
  • Software: the computer programs used.
  • Information: data that has been converted to have meaning.
  • Procedures: a series of actions that are conducted to ensure operations run smoothly.
  • People: humans who input the data.

The ICT framework is responsible for transmitting data in real-time wirelessly using technology and cloud-based infrastructures. An example of this is traffic patterns being analyzed through sensors on any given roadway.

IoT applications

IoT applications are based within the cloud and are used to receive, analyze, and manage the incoming issues as they are occurring. For example, if traffic flows are moving inadequately because of poorly timed traffic lights, the sensors would detect the traffic flows and patterns and the IoT applications would adjust the timing of traffic lights to enhance traffic flow efficiently in real-time. Actively responding and adjusting to a city’s needs in this manner optimizes safety concerns and provides actionable insights on a day-to-day basis.

Geographic information systems (GIS)

GIS is used in smart cities for planning, mapping, and development purposes. The use of GIS results in urban areas being able to manage waste management issues, water management, and excessive energy consumption, which is often an issue in populous urban regions. Los Angeles is an example of where GIS can be used to manage various systems as it experiences grid outages nearly every summer as well as needs to manage water consumption in periods of drought.

Insurance for smart infrastructure

Large scale innovation, such as smart cities, requires insurance to protect and safeguard the physical products, companies providing the product, and consumers using the products.

Key factors for smart city insurance are the decrease in risks due to smart technologies, the new risks that could emerge due to smart cities, the increase of urban populations, and the fact smart cities may not be fully realized for decades. It is important to note that while physical risks posed in current cities may decline with smart technology, cyber risks due to increased technological dependence are expected to grow.

Research shows that when city populations double, infrastructure and cost only increases by 85% while crime and human factor incidents increase roughly 115%. This means insurance companies will have to be flexible in coverage and services due to seen and unforeseen risks posing threats to the current models of insurance.

Insurance companies are posed with the following questions while looking at smart cities, namely the effect smart cities may have on decreasing risk for citizens. As far as insurance companies go, less risk could decrease the number of consumers opting for insurance and even pose a risk to the viability of the current insurance model. Key questions include how smart cities will affect smaller regional insurers, vehicle and health risks, and the structure of commercial businesses.

Key smart city businesses effects on insurance

As smart cities emerge and grow, less reliance on individual auto ownership is expected as citizens opt for ride-sharing, autonomous vehicles, and new public transportation options. This is expected to reduce the total number of vehicles on the road and total number of accidents.

Home ownership

Smart cities would create an increase in compact living situations like apartment rentals and purchasing condos. Conversely, this means that there will be fewer homeowners, but a higher cost for the homes that do exist in the city. As a result, the disparity of real estate values will grow and the distribution will change significantly.


A shift to smart cities would create new and change existing businesses, and increase the movement of those commercial entities from small towns or cities to dense urban areas. This is expected to decrease the risk for the business owner’s real estate and vehicle fleets.

Worker’s Compensation

A decrease in employee and worker risk would impact the insurance sector, causing less need for worker’s compensation insurance. Worker commute and workplace safety would benefit from reduced travel times and more efficient company structures, reducing accidents, and improving safety.


Air and water quality has been a problem for 21st-century cities, but pollution in these systems is expected to decrease as smart cities implement more efficient solutions for manufacturing, transportation, and workplace safety. The expectation of increased public mobility in the city and better public safety would also contribute to lowered health risks.


The smart city industry is projected to be a $400 billion market by 2020, with 600 cities around the globe expected to generate 60% of the world's GDP by 2025, according to McKinsey research, as previously published in TechRepublic.
July 16, 2018
In addition, the National Science Foundation allocated $60 million in new funding for its Smart Cities Initiative.
Across the globe, smart city technology spending reached $80 billion in 2016, and is expected to grow to $135 billion by 2021, according to a report from the International Data Corporation (IDC).

And the White House announced in late 2016 that it would make an investment of $80 million for smart cities, expanding upon an initiative that began in September 2015.

In 2015, the Obama administration announced a new smart cities initiative to invest $160 million in federal grants to create software and IoT applications to help local communities improve city services.



Further reading


How Smart Cities Prepare for Technology Infrastructure Risks

Travelers Insurance


How the Future of Insurance is set by Smart Cities | Digital Insurance Agenda | Accelerate Innovation in Insurance

Roger Peverelli, Reggy de Feniks


October 8, 2020

Documentaries, videos and podcasts





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